2. Answer the following questions: (a) The Central Bank pays 4.1% compounded monthly on certain types...
2. Answer the following questions:
(a) The Central Bank pays 4.1% compounded monthly on certain types
of deposits. What is the effective annual rate of interest?
(b) If interest is compounded daily, what nominal rate of interest compounded daily will maintain the same effective rate of interest in part (a)?
Homework Answers
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
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2. Answer the following questions:
(a) The Central Bank pays 4.1% compounded monthly on certain types...
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Bank A pays 8% interest, compounded quarterly, on its money market account. The managers of bank...
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21) If a bank pays a 3.5% nominal annual rate, with monthly compounding, on deposits, what...
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Which of the following bank accounts has the highest effective annual return (ear)
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eBook Bank A pays 7% interest compounded annually on deposits, while Bank B pays 6.5% compounded...
eBook Bank A pays 7% interest compounded annually on deposits, while Bank B pays 6.5% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? b. Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest
Assumptions and Calulated Values Bank Rate Information: Colin's Bank Account Rate (compounded monthly) Monthly Bank Rate...
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2. What nominal annual interest rate compounded monthly is equivalent to an effective annual interest rate of 8% per year for the first 10 years followed by a nominal annual interest rate of 5% compounded daily for the second 10 years? Give your answer as a percent rounded to three decimal places. Answer:
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